Indonesia trip delivers MoUs

During the visit, many Indonesian firms and investors expressed their big interest in Vietnam’s market

Last Wednesday afternoon, Samal Abdul Nasir Bamadhaj – director of Indonesia’s Intra Asia Indonesia – came to the storied Raffles hotel in Indonesia’s capital city of Jakarta to sign a memorandum of understanding (MoU) on coal trading and seaport investment with Vietnam’s Hong Phat Group.

The document, signed during Party General Secretary Nguyen Phu Trong’s official visit to Indonesia last week, would enable the Indonesian firm to build a $1 billion coal port in Vietnam.

“I feel very happy about the signing of the MoU. It is very important to us as it will be the prerequisite for us to co-operate with Hong Phat, and we will realise it very soon,” Bamadhaj told VIR.

The port, with a designed capacity of about 15-20 million tonnes of coal per year, will be largely used for cargo and logistics to serve export and import activities between Indonesia and Vietnam, especially coal.

This is the first time that Intra Asia Indonesia, a coal miner and trader with three mines throughout Indonesia, has co-operated with a Vietnamese firm. Earlier, Hong Phat’s representatives came to Jakarta to meet with coal suppliers to discuss the potential of coal trading business in Vietnam. Intra Asia Indonesia showed great interest in co-operating with Hong Phat.

Big deals and commitments

The MoU between these two firms is one among a series of co-operation deals (see box) that were inked between Vietnam and Indonesia during Trong’s official visit to the country last week.

In Jakarta, firms from both countries made increased investment co-operation commitments, with a focus on aviation, property, industrial park development, and coal supply.

For example, Vietnam’s flag carrier Vietnam Airlines and Indonesia’s flag carrier Garuda Indonesia signed an MoU to strengthen their codeshare partnership and co-operation in services, MRO (maintenance, repair, and overhaul), and cargo shipments.

The two airlines want to expand their current codeshare partnership for the following routes: Hanoi-

Ho Chi Minh City, Hanoi/Ho Chi Minh City-Singapore, Singapore-Jakarta/Bali, and Jakarta-Bali/Java.

Also during Party General Secretary Trong’s visit, the budget carrier Vietjet announced a new international route connecting Ho Chi Minh City with Jakarta. The Ho Chi Minh City-Jakarta route, a three-hour journey, will operate daily beginning December 20 this year.

“The new route will help boost ties between these two economic, cultural, and financial hubs, helping to boost regional trade and integration,” said Vietjet’s vice president Dinh Viet Phuong.

Meanwhile, Indonesia’s Jababeka Group is seeking support from the Indonesian Embassy in Vietnam to help organise the signing of an MoU between Vietnam’s Ministry of Planning and Investment and Indonesia’s Ministry of Industry. This MoU will support Jababeka with its plans to build an integrated township and an industrial park in central Vietnam.

“This MoU will serve as a formal platform to continue our search for building capacity in Vietnam and vice-versa, for Vietnamese developers and investors to come to Indonesia,” said Jababeka CEO Budianto Liman. “Our project will hopefully be the gateway to help small- and medium-sized Indonesian enterprises come and explore Vietnam’s market of nearly 100 million people, and also help Vietnam boost its socio-economic development as well as increase both countries’ bilateral trade.”

Last month, Liman visited four central localities in Vietnam – Danang, Quang Nam, Thua Thien-Hue, and Quang Tri – to explore investment possibilities in urban areas, industrial parks, and modern services.

Vietnam-Indonesia investment co-operation has also been active in the oil, gas, and educational sectors. Specifically, following the Confidentiality Agreement signed in April 2017, Indonesia’s Premier Oil and Vietnam’s state-run National Oil and Gas Group are continuing to explore opportunities for the two countries to collaborate on a strategic cross-border gas infrastructure project in the North Natuna Sea, to potentially develop the resources of the Tuna Gas Field.

For the first time, there has been co-operation between Vietnamese and Indonesian higher education institutions. Vietnam’s Dong A University has just signed an MoU with Indonesia’s President University, laying the groundwork for future co-operation, including the upcoming collaboration in hosting the International Conference on Family Business and Entrepreneurship that will be held in Vietnam in 2018.

An attractive investment location

Indonesia’s Ambassador to Vietnam Ibnu Hadi told VIR that more and more Indonesian firms and investors are considering Vietnam as a very important production and export base for them in ASEAN. “They will increase their investment in Vietnam in the sectors of spare car parts, education, property, infrastructure, plastic moulding, consumer products, supplementary foods, agriculture, and processing,” Hadi said.

Indonesia’s Trade Minister Enggartiasto Lukita advised Indonesian firms and investors to boost their co-operation with Vietnam to foster trade and investment, instead of competing with the country.

“The co-operation should be focused on investing in Vietnam to market more products to nations that Vietnam has free trade agreements (FTAs) with,” Lukita said. “We need to invest in Vietnam not only because it has 93.3 million people, but also because of the other countries that have bilateral FTAs with Vietnam.”

Currently, Vietnam has signed four bilateral FTAs with Japan, Chile, Korea, and the Eurasian Economic Union (Russia, Belarus, Kazakhstan, Armenia, and Kyrgyzstan); and seven multilateral FTAs (with the ASEAN Economic Community and the Trans-Pacific Partnership, and between ASEAN and India, Australia-New Zealand, South Korea, Japan, and China).

Intra Asia Indonesia’s Bamadhaj told VIR that Vietnam’s FTAs, fast economic growth, stable political climate, improved business and investment environment, and big demand for infrastructure are “greatly attracting not only Intra Asia Indonesia, but also many other Indonesian firms”.

“We will continue seeking more Vietnamese partners to co-operate with,” Bamadhaj said. “Your country’s potential is great. For example, Vietnam’s development of more coal-fired power plants will give us many opportunities to supply high-quality coal.”

According to the Indonesian Embassy to Vietnam, many Indonesian firms have been successfully operating in Vietnam, such as Citra Westlake City Development Co., Ltd. (Ciputra Group), Vietmindo Energitama, Thang Long Cement, Dynaplast Vietnam, Japfa Comfeed, and Akebono Brake Astra Vietnam.

As of July 20, 2017, Vietnam had 64 Indonesian valid investment projects registered at $439.3 million. Vietnam also has seven valid investment projects in Indonesia, operating in mineral exploitation, wholesale and retail, and ICT.

Last year, two-way trade between Vietnam and Indonesia ascended 20 per cent year-on-year to $5.6 billion, with Indonesian exports to Vietnam up 38 per cent and Vietnamese exports to Indonesia up 20 per cent year-on-year. It is expected that the bilateral trade turnover will climb to $7.5 billion by the end of the year – up about 20 per cent year-on-year – according to the Indonesian Embassy. The two countries are looking to hit $10 billion in the near future.